Question

~~~~In Excel~~~

-What is the present value factor for 4 years if interest rate is 7.9%? Show how you found the value.

-What should be input for the Excel function PV if you are trying to find present value of $100 coming in 5 years time when interest rate is 10%?

-What can you do to check if there are multiple IRRs for a project in Excel?

Answer 1

1	Interest rate	7.9%
	Time	4
	PV factor	$0.73776	Formula = PV(7.9%,4,0,-1,0)				$0.73776
2	PMT	100
	Time	5
	Rate	10%
	UsIng PV funcion in excel
	PV	$379.08	Formula =	PV(10%,5,100)
	Lets take an example to find multiple IRR
		A	B	C	D	E	F	G
	Year	0	1	2	3	4	5	6
1	Cash flows	-5000	2800	2800	2800	2800	2800	-9300
	Now we take guess values raning from 0% to 50% in steps of 5%
	Guess Values	Multiple IRR Formula = IRR(A1:G1,Guess Values)
	0%	2.6%	IRR(A1:G1,0%)
	5%	2.6%	IRR(A1:G1,5%)
	10%	2.6%	IRR(A1:G1,10%)
	15%	27.4%	IRR(A1:G1,15%)
	20%	27.4%	IRR(A1:G1,20%)
	25%	27.4%	IRR(A1:G1,25%)
	30%	27.4%	IRR(A1:G1,30%)
	35%	27.4%	IRR(A1:G1,35%)
	40%	27.4%	IRR(A1:G1,40%)
	45%	27.4%	IRR(A1:G1,45%)
	50%	27.4%	IRR(A1:G1,50%)